公司金融英文课件LUBS1035_Lecture2_Time_Value_of_Money.ppt

Present Values for Multiple Periods Present Values for Multiple Periods Present Values for Multiple Periods Present Value: A Generalisation Where Vt is the value at time t; r is the interest rate Table 4.3Present Value Interest Factors Test your knowledge Calculating Present Value Assume you win ￡10,000 on the National Lottery but it is payable in 5 years. Assuming an interest rate of 5% what is your win worth today? Your solution Present Value: 10,000 x 1/(1.05) 5 = 10,000 x 0.7835 = 7,835 We can check this figure using the present value tables Table 4.3Present Value Interest Factors Figure 4.3Present Value of ￡1 for Different Periods and Rates Tying it all Together Example 4.8Evaluating Investments Example 4.8Evaluating Investments Activities for this Lecture * * LUBS1035 Foundations of Finance 2012/13 John Smith Lecture 2: Introduction to Valuation: The Time Value of Money Leeds University Business School Overview of Lecture Corporate Finance in the News http://www.bbc.co.uk/news/business West Coast Rail Deal Franchise bidding process for the main West Coast line from London to Scotland – one of the more profitable franchises Franchise currently run by Virgin Rail (part owned by Sir Richard Branson) 13+ year franchise to encourage long term investment Governments invites ‘bids’ and awards the franchise to the ‘best’ bid. FirstGroup bid ￡13bn and won…until yesterday Cost to UK government ￡40 million, and counting… So what went wrong? Robert Peston “To put it in terms that we can all understand, if I expect to earn a pound from my work tomorrow, that pound is much more likely to materialise than a pound that I might expect to earn in 2025 (if anyone will still employ me then). By extension, when First Group and Virgin made their bids to run the line that connects London with Manchester and Glasgow, it would have been reasonable to expect the Department for Transport to put a much greater weight on revenues the companies expect to generate in t